Senior US District Judge Clarence Newcomer ruled that
ERISA does not pre-empt a legal claim filed under
Pennsylvania’s bad-faith statute by plaintiff Joel
Rosenbaum challenging the denial of long-term disability
benefits.

Newcomer said his decision was despite the fact that he
and other federal jurists in his district had repeatedly
ruled in other cases that claims under the Pennsylvania
statute were pre-empted by ERISA.

The change came about because of a federal law change
articulated in several US Supreme Court cases, Newcomer
said. The key difference, according to Newcomer: how judges
are supposed to decide whether a state law being tested
regulates insurance matters and is not vulnerable to an
ERISA pre-emption.

A Three-Part Test

Newcomer said the Supreme Court cases held that state
laws didn’t have to strictly meet a three-prong test from
the McCarran-Ferguson Act to judge whether the law
regulated insurance.

whether the practice has the effect of transferring
or spreading a policyholder’s risk

whether the practice is an integral part of the
policy relationship between the insurer and the
insured

whether the practice is limited to entities within
the insurance industry.

Now the three-part test is to be used as “consideration
to be weighed” in deciding a law’s insurance relationship,
Newcomer said.

Newcomer’s ruling means Rosenbaum can proceed with his
lawsuit under the Pennsylvania law, which includes the
right to award punitive damages and attorneys fees.